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CHICAGO-For the second quarter in a row, Chicago’s industrial market hit a new high for vacancy in Q3. Vacancy has now reached 11.4% – the highest rate ever recorded here, according to Cushman & Wakefield’s Q3 industrial markets stats. This peak in vacancy is up from 11% at mid-year and has jumped from 9.3% a year ago.

“One of the significant findings, which we saw in our second quarter report also, was that overall vacancy continued to creep up,” Faith Ramsour, director of research for Cushman of Illinois, tells GlobeSt.com. “Overall vacancy is 11.4%, which is the highest ever recorded. We hit a high last quarter as well and it’s only continued to creep up.”

According to Cushman’s numbers, available inventory has hit 130 million square feet, but Ramsour makes the interesting distinction that the notable increase has been entirely in the amount of direct space available on the market. “When you’re looking at vacancy, the sublease vacancy rate has remained consistent,” Ramsour says. “It’s right now 0.6 percent, and it’s been in that range since mid-2000, so when we look at the overall vacancy rate, we’re looking at an increase in space available on a direct basis. It’s also the sixth straight quarter of negative absorption, meaning more vacant space came on the market than was leased to users.”

According to Grubb & Ellis’ stats, Q3 saw around 774,000 square feet of negative absorption. This brings net absorption year to date to nearly 3.8 million square feet, Grubb’s research says. As a corollary to the increased vacancy and decrease demand, average asking rental rates have also taking a hit, dropping to $4.76 per square foot, according to Grubb’s data.

Only 1.3 million square feet of new space was delivered to the market in Q3, and Cushman expects the trend of decreased construction to continue. “The other trend is the amount of speculative development under construction,” Ramsour says. “That space has just declined drastically, and obviously that’s due to the economic climate. Right now there’s 462,000 square feet under construction, which is the lowest amount ever recorded, and the historical amount on average is 10 million square feet, so that’s a drastic drop off right there.”

Including build-to-suit development, Ramsour says there is a total of around 2.5 million square feet currently under construction, which is far lower than the average amount of space under construction historically. “The amount of projects under construction is a good indicator, and we look at that because that means there’s going to be less supply added to the market,” Ramsour says. “To get back to market equilibrium, the amount of available space and supply really has to decrease, so the fact that we have less space being added to the market right now is a good thing.”

Ramsour says she expects to see the beginning of a turnaround with the industrial market. “What surprised me now is that we’re still going down,” Ramsour says. “It’s more of a tenants’ market and they’re able to take advantage of low rental rates and concessions that landlords are offering. Until we see demand spike, it’s going to be a prolonged recovery, because everything is at historic lows in terms of activity and historic highs in terms of vacancy.”

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